nep-ene New Economics Papers
on Energy Economics
Issue of 2006‒07‒28
three papers chosen by
Roger Fouquet
Imperial College, UK

  1. Where Are the Industrial Technologies in Energy-Economy Models? : An Innovative CGE Approach for Steel Production in Germany By Katja Schumacher; Ronald D. Sands
  2. Pollution and the Price of Power By Donald N Dewees
  3. Altruism and Climate By Ingela Alger; Jörgen W. Weibull

  1. By: Katja Schumacher; Ronald D. Sands
    Abstract: Top-down computable general equilibrium (CGE) models are used extensively for analysis of energy and climate policies. Energy-intensive industries are usually represented in top-down economic models as abstract economic production functions, of the constantelasticity-of-substitution (CES) functional form. This study explores methods for improving the realism of energy-intensive industries in top-down economic models. We replace the CES production function with a set of specific technologies and provide a comparison between the traditional production function approach in CGE models and an approach with separate technologies for making iron and steel. In particular, we investigate the response of the iron and steel sector to a set of CO2 price scenarios. Our technology-based, integrated approach permits a choice between several technologies for producing iron and steel and allows for shifts in technology characteristics over time towards best practice, innovative technologies. In addition, the general equilibrium framework allows us to analyze interactions between production sectors, for example between electricity generation and iron and steel production, investigate simultaneous economy-wide reactions and capture the main driving forces of greenhouse gas emissions reductions under a climate policy. We conclude that technology specific effects are crucial for the economic assessment of climate policies, in particular the effects relating to process shifts and fuel input structure.
    Keywords: Industrial technologies, energy use, iron and steel production, technological change, general equilibrium modeling
    JEL: C6 D5 L6 Q4 Q5
    Date: 2006
  2. By: Donald N Dewees
    Abstract: Recent benefit-cost studies have shown that the marginal benefits from controlling conventional air emissions from coal-fired electric utility power plants in the US exceed marginal costs of pollution control. Moreover existing and proposed regulations ignore harm caused by the emission of greenhouse gases and harm caused in Canada. This means that electricity prices are too low wherever coal is the predominant fuel. However the same studies suggest that the mis-pricing of electricity is 4% or less. This paper will argue that in some regions of the US the wholesale price of electricity should be increased by up to 50%, if all externalities are to be included in the price. Getting the environmental price right could reduce pollution levels, increase energy conservation, and lead to wiser choices of new generation technology.
    Keywords: electricity, electricity price, air pollution, emissions trading, CAIR
    JEL: L94 Q40 Q42 Q50 Q51 Q53 Q58
    Date: 2006–07–19
  3. By: Ingela Alger (Boston College); Jörgen W. Weibull (Stockholm School of Economics)
    Abstract: Recognizing that individualism, or weak family ties, may be favorable to economic development, we ask how family ties interact with climate to determine individual behavior and whether there is reason to believe that the strength of family ties evolves differently in different climates. For this purpose, we develop a simple model of the interaction between two individuals who are more or less altruistic towards each other. Each individual exerts effort to produce a consumption good under uncertainty. Outputs are observed and each individual chooses how much, if any, of his or her output to share with the other. We analyze how the equilibrium outcome depends on altruism and climate for ex ante identical individuals. We also consider (a) "coerced altruism," that is, situations where a social norm dictates how output be shared, (b) the effects of insurance markets ,and (c) the role of institutional quality. The evolutionary robustness of altruism is analyzed and we study how this depends on climate.
    Keywords: altruism, family ties, individualism, moral hazard, evolution.
    JEL: D02 D13
    Date: 2006–07–10

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